In Depth

Rehearing a case at the request of the appellant, the Indiana Court of Appeals reaffirmed its original opinion that trustees
are not bound by an arbitration clause that was signed by predecessors.

In Smith Barney v. StoneMor Operating LLC, et al., No. 41A04-1103-MF-96, Smith Barney requested
a rehearing of a trial court’s denial of motion to compel arbitration. Affirming its original opinion, the COA held
that two companies that took control of a mortuary business did not sign the original client agreements the mortuary business
had with Smith Barney. Those original agreements contained an arbitration clause, which Smith Barney claims applies to StoneMor
and Independence Trust Co.

A mortuary business had been placed in receivership after its owner allegedly stole millions of dollars in cemetery trust
funds. StoneMor agreed to buy the company, and Independence was appointed trustee of trusts that had been administered by
the receiver, along with new trusts that StoneMor established. The trial court allowed StoneMor and Independence to assert
receiver’s claims against Smith Barney, which they did by filing a complaint.

A week later, Smith Barney filed a motion to compel arbitration. Smith Barney claims that with respect to contracts, trust
law clearly recognizes that a successor trustee is bound by contractual obligations entered into by its predecessor trustees
relating to the trust. But the COA wrote that Smith Barney had not cited a single case in support of that claim.

The appeals court held that the appellees were not parties to the client agreements executed by predecessors Community Trust
and Security Financial, and therefore did not personally agree to submit to arbitration. Smith Barney asserts that Independence
Trust is nevertheless bound by the arbitration clause “as a consequence of [Independence Trust] assuming the position
as the successor trustee to those predecessor trustees.”

Regardless of whether a “successor trustee” may be considered a “successor in interest” for purposes
of the client agreements, the fact remains that Independence Trust did not sign the agreements. Consequently, there is no
basis for compelling StoneMor to arbitrate its claims, the COA held, affirming the trial court’s judgment.

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